The fall-out from the Chancellor’s Budget, clamping down on tax avoidance by rich property owners, is still working its way through the £2m-plus prime London market.
The new regime may also be frightening off the French super-rich, desperate to avoid the possibility of a new wealth tax if – as seems likely – Francois Hollande is elected on Sunday as French president.
Affluent French people may have retreated from earlier plans to escape to the UK as a property tax haven, with the possibility that they will merely have swapped a French wealth tax for a British one.
It is a scenario that George Osborne may not have considered when he drew up his Budget, while the uncertainty continues as a decision on an annual ‘wealth’ property tax is awaited.
In the Budget, Stamp Duty on £2m-plus properties was raised overnight to 7% for individuals and immediately to 15% for companies, funds and other ‘non natural persons’.
The Budget also raised new Capital Gains Tax implications, plus the spectre of an annual levy on ownership of expensive properties.
But while PR machines for some agents are saying there has been no effect from the Budget, others are admitting that £2m-plus deals to company-type purchasers have ground to a standstill.
The spin-free Ed Mead, of Douglas & Gordon, said: “It’s had a significant effect. Those looking to invest on behalf of funds have been hit three ways. So that sort of investment is on hold at the moment.
“Overall, there is a constipated market at over £2m while this incompetent Government sort out which bunch of rich foreigners they want to annoy most in their current ‘consultations’ on who will be exempt.
“This is the consultation they should have had before March 22 but didn’t.
“We are told that it will be the autumn at the earliest, so don’t expect many deals to be done before then.”
At WA Ellis, Richard Barber, partner in residential sales, admitted that the rise in Stamp Duty plus the threatened introduction of an annual property tax on expensive properties has deterred some foreign buyers.
Barber said: “The busiest price level is, of course, beneath the £2m watershed, whilst we contend with the speculation and fall-out from the Budget which is still fresh in all property owners’ minds.
“Although we have heard of several schemes to mitigate exposure to the increased level of Stamp Duty and potential annual charge, it would appear that many potential purchasers previously using these vehicles are now electing to purchase in their own names or that of a family member.
“It will undoubtedly be some months before the Government’s consultation paper has been fully digested and there is some clarity on the potential impact of the Chancellor’s new measures.”
His colleague Lucy Morton, head of lettings, said: “Since the Budget I have been inundated with calls from our overseas clients questioning the impact of the increased Stamp Duty on their investment, as many own their properties in off-shore companies or as ‘non-natural persons’.”
She added: “Some foreign investors are putting further investment into property on hold until they receive clarity on this levy.”
However, Morton believes that there could be a wave of French buyers if Hollande is elected President this Sunday.
She said: “He plans to raise upper income tax to 45%, bring more people under the annual wealth levy, and introduce a hotly contested 75% super tax band for anyone whose annual income exceeds £1m.
“London is already a favourite destination for the French with the Lycées brimming full, so it will be interesting to see the result of the election.”
Knight Frank insisted that property prices in prime central London rose a further 1.1% in April, despite the Budget.
The firm also claimed that the number of new £2m-plus applicants in April was 13% higher than in March, signalling that prospective buyers were not deterred by the Stamp Duty rises.
It also said that sales subject to contract in the three months to April were up 50% compared with the same period last year.
%20(002).png)
Comments